6 Crypto Trend Predictions for 2022

Brace yourself for another extraordinary year in crypto.

2021 was an extraordinary year for cryptocurrencies. Almost half the people who own Bitcoin (BTC) in the U.S. only bought in this year, according to research by Grayscale Investments. The non-fungible token (NFT) and decentralized finance sectors are both booming, and a number of top cryptocurrencies saw gains of over 5,000%.

So, what's in store for 2022? Let’s take a look at six crypto trends to keep an eye on.

1. Gaming and the metaverse will continue to grow

Blockchain gaming came into its own in 2021. Axie Infinity (AXS) led the way as it pioneered the concept of play-to-earn games. This, combined with improved graphics and gameplay, created a surge in demand for crypto games. Play-to-earn games mean people can earn tokens in-game that they can swap on a cryptocurrency exchange for hard cash.

Facebook's decision to rebrand as Meta put virtual worlds into the spotlight, even though metaverses have been gaining steam for a while. It isn't yet clear what shape these virtual worlds will take -- particularly whether they'll be decentralized, or whether corporations will dominate the space. But since cryptocurrencies are the most likely form of payment in the metaverse, we can expect crypto to be part of this evolution.

2. Web 3 will start to take shape

Web 3 is the next generation of the internet -- a decentralized space where people get rewarded for sharing their time, building communities, or posting messages. It's connected to the gaming and metaverses above, but has wider implications.

And, like metaverses, it isn't yet clear how Web 3 will pan out. Some believe it's a chance for people to break free of big corporations sitting in the middle of our web browsing and social media. Instead, we'd control our own data and earn tokens for participation.

Existing companies are already looking for ways to stay relevant so we're unlikely to see the big players pushed out completely. But as an investor, everything related to Web 3 should be on your radar, as this is a key space to watch.

3. There'll be more regulation and government involvement

The spectre of increased crypto regulation worldwide has hung over the crypto market for a lot of this year. From China's moves to ban crypto entirely to El Salvador's acceptance of Bitcoin as legal tender, it is clear that governments can no longer ignore cryptocurrency. Here are a few ways governments are likely to act:

• Stablecoin regulations. Stablecoins are cryptos whose value is pegged to another commodity, such as gold or the U.S. dollar. However, regulators are concerned about how some of these coins are backed and whether they have enough reserves to support a run on a specific coin. Expect new rules early next year.
• Increased cryptoregulation. In addition to stablecoin rules, governments are grappling with how to increase investor protection without stifling the entire industry. There's been a lot of talk this year, which will likely convert into action in 2022.
• Central bank digital currencies (CBDCs). Various governments are weighing the benefits of introducing their own CBDCs or govcoins, such as a digital dollar. Unlike other cryptocurrencies, these would be backed by central banks and governments. All eyes are on China, which has almost completed its digital yuan pilot scheme.

4. We'll see even more adoption

According to a Chainalysis report, by the end of Q2 2021, worldwide crypto adoption was up over 880% from the previous year. We've seen more people buy crypto for the first time, more merchants accepting crypto, and more ways people can buy and earn interest on their crypto assets. Most recently, WhatsApp announced a pilot scheme that lets users send crypto payments just as they would a photo or text message.

That trend is likely to continue in 2022, especially as platforms work to make both cryptocurrencies and decentralized finance more accessible.

5. We'll also see more institutional interest

According to PitchBook Data, venture capital firms put almost $30 billion into crypto this year -- more than all the previous years combined. And a September survey of global institutional investors by Nickel Digital Asset Management revealed that 62% of those with no crypto exposure planned to take the leap in the coming year.

There's growing confidence in cryptocurrency as an asset class, which will only be strengthened by certain regulatory moves. The price of Bitcoin jumped in November following the launch of the first Bitcoin futures ETF, and many are hoping the SEC might greenlight a spot ETF that would be able to buy and sell Bitcoin rather than Bitcoin derivatives.

6. Some cryptos will fail

As is often the case with crypto, opinion is divided on whether we'll see overall prices soar or crash. In truth, we'll probably see both as it doesn't look like cryptocurrency will cease to be volatile anytime soon.

However, it is worth remembering that cryptocurrency is a high risk investment. Many coins have already failed, and many existing projects don't have the fundamentals to sustain them through tough times. Only invest money you can afford to lose, and don't assume that every cryptocurrency is going to make massive gains.

Blockchain technology has huge potential and we're only just beginning to see the ways that it can transform various industries. But there are still a lot of unknowns, so it is important to tread carefully. One thing's for sure. It'll be another crazy year in crypto land.

Emma Newbery owns Bitcoin. The Motley Fool owns shares of and recommends Bitcoin.